February CPI and PPI Both Exceed Expectations

On March 9, the National Bureau of Statistics released February’s price data. Both the CPI (Consumer Price Index) and PPI (Producer Price Index) exceeded market expectations.

Specifically, the YoY PPI (-0.9%, expected -1.2%) has improved for three consecutive months, with a MoM increase of 0.4%, unchanged from the previous month; the PPIRM (Producer Purchase Price Index) YoY decline has narrowed for seven months in a row, with a MoM increase of 0.7%, accelerating for three consecutive months. The CPI MoM growth rate expanded from 0.2% last month to 1.0%, the highest in nearly two years; the YoY increase rose from 0.2% last month to 1.3% (expected 0.8%), the highest in nearly three years.

Looking at specific segments, prices of computing power and AI-related upstream and downstream products have risen significantly, along with a rebound in industries like photovoltaics and lithium batteries, which are related to “involution-style” competition governance.

What are the underlying reasons for these data exceeding expectations? How are they related to the overall economic recovery pace? What favorable conditions are needed for PPI to maintain its recovery trend and turn positive? Which industries present investment opportunities? The Daily Economic News reporter conducted an interview on these topics.

Demand Rebound and Policy Effectiveness

Feng Lin, Executive Director of Research and Development at Orient Securities, told the Daily Economic News that the price trend at the beginning of the year continues the upward momentum since late 2025, mainly driven by increased efforts to stimulate consumption and counter involution, as well as the accelerated rise in international gold prices.

Guotai Fund Management Co., Ltd. pointed out that the ongoing recovery of PPI and PPIRM is mainly driven by three factors: first, rising international commodity prices, with increases in non-ferrous metals and crude oil providing strong input cost support; second, the effects of involution reduction in industries like photovoltaics and lithium batteries are gradually showing, with product prices improving—for example, photovoltaic equipment prices increased by 2.7 percentage points to 3.2% since January, and lithium battery manufacturing prices turned positive from -1.1% in January to 0.2%; third, the development of new productive forces has significantly boosted high-tech manufacturing and some downstream industries’ PPI, with explosive demand for computing power further driving related industry chain prices upward.

What is the relationship between PPI, PPIRM, and other statistical indicators? Are there leading indicators among them? How are they connected to the overall economic recovery?

Guotai Fund Management stated that PPI reflects the selling prices of industrial products, while PPIRM indicates raw material costs; the difference between the two can represent industrial enterprise profits. The PMI (Purchasing Managers’ Index) price component can be seen as a leading indicator of PPI, and as an upstream leading indicator, PPI theoretically transmits along the industrial chain to CPI, serving as an early signal of price recovery.

Currently, the narrowing YoY decline of PPI and its continued positive MoM growth are marginal signs of demand recovery and policy effectiveness. If PPI turns positive YoY and continues to rise, it indicates improved industrial profitability, enterprise expansion, and an overall economic recovery cycle.

What additional favorable conditions are needed to sustain the PPI recovery trend and turn it positive?

Guotai Fund Management responded that it is necessary for fiscal policy to maintain reasonable investment in infrastructure and people’s livelihoods to effectively boost upstream industrial demand; monetary policy should remain reasonably ample to lower corporate financing costs and support production and investment recovery. Additionally, continued implementation of anti-involution measures in specific industries and orderly elimination of excess capacity are essential. As the domestic economic cycle becomes smoother and corporate profits improve, combined with rising external commodity prices, multiple favorable conditions could lead to PPI turning positive YoY in the future.

High Certainty in Computing Power and Related Sectors

From specific segments, prices of computing power and AI-related upstream and downstream products have risen notably; industries related to involution governance like photovoltaics and lithium batteries have seen price rebounds; coal mining, cement manufacturing, and new energy vehicle manufacturing have experienced narrower price declines.

MoM in February, prices of electronic semiconductor materials, external storage devices and components, and integrated circuit packaging and testing increased by 2.8%, 1.2%, and 1.1%, respectively. YoY, in February, prices of electronic components and electronic specialized materials increased by 4.9%, control micro-motor prices rose by 1.6%, service robots manufacturing prices increased by 0.7%, and high-end equipment showed strong momentum, with aircraft manufacturing prices up by 7.7%.

Which industries present investment opportunities this year?

Guotai Fund Management indicated that on one hand, demand for AI (artificial intelligence) computing power industry chain remains strong, with tight supply and demand for computing power, servers, and optical modules, making prices with upward potential and high performance certainty. On the other hand, as involution-style competition eases, prices in new energy sectors like photovoltaics and lithium batteries have stabilized and rebounded, with profit recovery underway. Additionally, benefiting from rising commodity prices and inflation expectations, upstream resources and building materials sectors have valuation repair opportunities. Overall, this year, sectors with expected price increases and improving patterns—such as AI computing power, upstream resources, and building materials—are favored for investment.

Looking ahead, Feng Lin said that on one hand, the situation in Iran is significantly pushing up international oil prices, which will to some extent transmit domestically and generate CPI upward momentum; on the other hand, service consumption prices are seasonally expected to fall sharply after the Spring Festival, and March’s CPI MoM is expected to turn negative, with YoY growth falling back to around 0.9%. The government work report this year set the CPI increase target at “around 2%.” In recent years, low price levels make this growth target even more significant. The “around 2%” CPI target will be more rigid than last year, indicating that efforts to expand domestic demand and counter involution will continue this year.

Daily Economic News

(Edited by: Wang Zhiqiang HF013)

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